January 30, 2013, Recession Thunderdome Battle Turns to Lakshman's Favor

NEWS ITEM (Jan 31, 2013): Fairholme Fund (FAIRX) Closes To New Investors After Rebound. 

Honey EC: Thanks to R.P. for the heads-up about Fairholme Fund.

In April 2011, Bob Brinker sold all Marketimer equity model portfolio holdings in Fairholme Fund. With that money he added to the portfolio holdings in Vanguard Total Stock Market Fund (VTSMX).  

Now Fairholme is closing to new investors after it had its best year EVER in 2012 -- beating the total stock market handily. 

IN EDIT: Gerry called it to my attention that Fairholme Fund declined precipitously after Brinker sold it in April 2011. I compared the price now to then and see that it is still a bit below that sell price. The ideal crystal ball move would have been to sell in April, 2011 and buy it back in January, 2012. Anyone got one? :) 
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January 30, 2013....Oops! It looks like Bob Brinker may not be the one leaving the Thunderdome quite yet.    From CNBC TODAY: GDP Shows Surprise Drop for US in Fourth Quarter

A long time Bob Brinker fan, pen-name Marc Ultra,  wrote:

"Lakshman and Bob in the Thunderdome. 2 men enter, one man leaves.

While technically there may be wiggle room because they're not defining a recession in exactly the same way, the battle lines are now clearly drawn, one will be correct and one will be wrong. Today Bob flat out said the ECRI ("the private forecaster out of NY") will be wrong and those (like me) who have acted on their call will regret if. It's possible Bob might even be using me as as part of his example since when he was using an alias he would respond to me at various times (including praise at times), so if he glances at this board occasionally he is aware that I have flipped from bull to bear due to the ECRI call but obviously a lot of people have made investment changes based on the CRI so the possible personal point would not be that relevant regardless."

Here is the TV video history of Lakshman's personal appearance recession calls:

*  September 30, 2011...Wall Street Online: "Economic Cycle Research Institute's Lakshman Achuthan on The News Hub discusses why his firm is now predicting the U.S. economy is indeed tipping into a new recession and there's nothing that policy makers can do to head it off."

*  September 30,  2011....Bloomberg TV:  "Economist Says U.S. Recession inescapable"

*  February 24, 2012....Bloomberg TV: "GDP Data Signals U.S. Recession"

*  May 9, 2012.....Bloomberg TV: "Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute, talks about his renewed call for the U.S. to enter another recession this year."

*  July 10, 2012....Bloomberg TV:  "We're in recession already."

*  September 13, 2012....Bloomberg TV: "U.S. economy is in a recession."

*  November 29, 2012....ECRI Business Cycle: Recession underway. "Indicators used to determine official U.S. recession dates have been falling since mid-year."

*  November 29, 2012....CNBC: "Ignore Fiscal Cliff, U.S. is in Recession"

It will be interesting to see if Bob Brinker mentions the fact that there has now been one quarter of negative GDP --  which looks real close to the time frame that Lakshman Achuthan laid out  when he predicted a recession over a year ago.

January, 4, 2011, Marketimer, Bob Brinker said: "We are maintaining our real gross domestic product  (GDP) estimate of 1.5% to 2.5% for 2013. This is the same estimate we used successfully in 2012. The 2012 annualized real GDP growth rate stands at 2.1% through the first nine months of reported data, and we expect the full 2012 year figure to be close to 2%."

So who will be declared the winner and who will need to apologize?  Brinker said he's waiting for an apology, but I honestly don't know if Lakshman knows who Brinker is.

Let's end with some humor by Birdbrain:

birdbrain said...

"In this corner wearing blue and gold trunks, co-founder of ECRI, predictor of an upcoming recession and who has the courage to appear with Suzanne Pratt on Nightly Business Report, Lakshman Achuthan.

And in this corner wearing in-the-red trunks, publisher of Marketholder, looking for a comeback after being defeated by both Cassandra and Bad News Bear in 2008 and terribly pummeled by Nevada Property, from Lake Las Vegas, Bob Brinker."

Pay per view, anyone?

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January 27, 2013, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

January 27, 2013....Bob Brinker hosted Moneytalk today......(comments welcome)


STOCK MARKET: Brinker gave the Friday closing numbers. But he didn't report that the Dow is still 1.9%  below its all-time closing high, the S&P 500 Index is still -4% from all-time high, and the Nasdaq is 37.6% under its all-time high.

Brinker said:  "The Nasdaq has been lagging for months now partially due to the weakness in the Apple Common Stock which has been marked down about 37% since the autumn of 2012."

INTEREST RATES: Brinker said: "If you look back through history, they are very, very low. They are a little bit higher than they were at their very low."

INFLATION....Brinker said: "Overall, the price trend in terms of inflation remains very low. We've received various inflation indicators in recent weeks and we really haven't seen much in the way of changes on inflation."

BRINKER STILL COMFORTABLE WITH INDEX FUNDS....Caller Bill from Illinois wanted to know what to invest in for his young granddaughter's future. Brinker said: "I'm comfortable using the S&P 500 Index or the Total Stock Market Index Fund. You could go to Fidelity and Vanguard, they both have low-cost no-load that invest in both." (So does Schwab.)

WORLD'S SIMPLEST PORTFOLIO.....Brinker said: "About 27 years ago on Super Bowl Sunday 1986, we first started talking about this concept of a portfolio that would be the world's simplest portfolio. And that would consist of two holdings. For example, a Total Stock Market Index, no-load fund. And that would be the equity component of this simple portfolio. And the income portfolio portion of that, you could use something like a Ginnie Mae Fund, for example. Or Vanguard has a Total Bond Market Index Fund that I also think would also be appropriate for that type of portfolio. So that's it. Now understand that if you adopted this simple portfolio and you were a buy and hold investor as part of this simple approach, you would have to ride out all the ups and downs along the way. And you would accept that going in because you're looking for the ultimate simplicity."

Honey EC: Why would you have to ride out all the ups and downs just because you used that portfolio? That makes no sense to me. Of course, if you are following Brinker's advice, you have been "riding out the ups and downs" since March 2003 -- no matter what portfolio you're in. 

BRINKER'S VIEW ON GOLD....Brinker said: "My view on gold has not changed...And my view is very straightforward. Those that want to have a small hedge in gold, then the  recommendation that I have given is the Exchange Traded Fund is GLD. Now that ETF has a reasonable expenses. It will give you exposure to gold bullion. It is the least expensive way to invest in gold."

Honey EC: Brinker's Marketimer still has GLD on the  recommended "Individual Issues" list -- and still no guidance for price or amount. 

BOB, WHAT'S YOUR PERSONAL ASSET ALLOCATION? Jim in Alaska asked: "I was  wondering if you could share with us percentage wise, roughly, of how you break up investing in your own personal money?" 

Honey EC: Brinker ignored Jim's question and immediately started talking about asset allocation in general. IMO, if Brinker did not want to answer Jim's question about his own personal money, he could have just said so. His  reply to Jim's question will clearly show you what a master Brinker is at spinning, evasion and double-talk:   

Brinker replied: "Well you make that decision, Jim, based on the way that you look at a situation from a standpoint of what your personal objectives are. What objectives you have down the line...Everybody is responsible for a personal asset allocation.....If you are approaching or in retirement, I think it makes good sense to think seriously about adopting a balanced investment portfolio....So I think that's the approach I would take, Jim, when you're trying to determine how do you make this personal decision about what your asset allocation is going to be.

Honey EC: Let me guess at the answer to Jim's question:  Brinker does NOT  eat his own cooking -- and never has.

VANGUARD GINNIE MAE FUND (VFIIX)....Dallas from Illinois asked Brinker for his current "assessment on the Ginnie Mae Fund."

Brinker replied: "Taking a look at it right now, the Ginnie Mae Fund has a duration of 3.6 and an average maturity of 5 1/2 years, which means a 1% increase in the the five-year rate would give you about a 3.6% decrease in the net-asset-value. The fund has a current yield of a little bit over 2%. I would view it as a conservative holding within an income portfolio....."

MONITOR INCOME HOLDINGS....Brinker continued: "As is the case with all income holdings, my recommendation is to monitor the income situation...assess the risk of changes in the interest rate landscape. I don't mean small changes as we have seen from time to time in recent years. But I mean major changes that could be very important to the net-asset-value of these types of funds.....the interest rate situation which relates to the economy, which relates to Federal Reserve policy, which relates to inflationary forces -- all of that, on an ongoing basis."

CALLER NERVOUS ABOUT STOCK MKT AND AAPL....Caller David from Virginia said: "I'm  getting a little nervous with the stock market being up near 14,000, and in particular with Apple.....Although I follow your diversify rules, I have no more that 4% of my holdings in Apple.  But nonetheless, do you envision that we might be near a top because everybody is talking about how the market can take off and I know that's the time to be wary....."

Honey EC: Again, Brinker did not answer the caller's question.  And this is the second time that Brinker has mislead the audience  in regard to AAPL.  Brinker's Marketimer recommendations have never included Apple. 

BRINKER'S LATEST ON AAPL....Brinker replied to David: "I'm simply repeating myself here. I've already said this on the broadcast. We recommended in the Marketimer investment letter in early October the sale of Nasdaq holdings that involved the Rydex Fund that invests in the Nasdaq 100. That involved the QQQ shares. And for me that involved my Nasdaq holdings including Apple. I also sold my Nasdaq holdings at that time, including Apple...And it was near its high for 2012 at that time. Nothing has changed that would change my mind on that. I was very happy with decision in early October and I stand by that decision. I published it in my investment letter and recommended to my subscribers that they sell their Nasdaq 100 holdings. And that was it. They went out of the model portfolios...."

IN EDIT WEDNESDAY: I received a private email from a man who doesn't believe that Bob Brinker ever said he owned Apple as an individual stock. He believes Brinker was only talking about Apple as part of the Nasdaq. 

On March 18, 2012, Brinker was not talking about Marketimer when he said this:  "You won't hear any complaints about Apple from me because Apple has been extremely good to me over the last decade or so....It's been a magnificent performer. It's a company that I'm invested in, and for the last ten years it's probably been the number one performer over that ten year period that I've owned it."  

           Originally posted HERE

Honey EC: Brinker may be happy about selling all Nasdaq holdings in October, but as of Friday, it is about 100 points higher than when he sold it. (BTW: The reason Brinker makes such a big deal of  announcing on air that he sold ALL Nasdaq holdings, including QQQ,  is to finally completely bury his year-2000 disastrous trade that was never closed. Subscribers were told in March 2003 to  "hold for recovery.") 

As for Apple, Brinker now says he sold his own holdings in that in October. Was he lying today, or was he lying on December 9th when he said he had "no opinion on the stock?  From my show summary on December 9, 2012: 

FrankJ sent a few comments about the Apple Stock call today: 

"Frequent caller Joe took a short ride on the MoneyTalk trolley today at 13 minutes into the 2nd hour. Joe wanted to know if Apple was a good buy at $532. 

Bob professed to have "no opinion" on the stock. But he "wished all shareholders the best." He was quick to point out that his portfolios sold all NASDAQ holdings in early October, "fortunately, very near the highs..." He added, as a consequence, he has no opinion on the stock." 

Honey EC: What a nice guy to withhold from listeners that he had sold all of his own Apple holding in October and in December tell the audience he had "no opinion." 

HERBALIFE DOGFIGHT ON CNBC....Brinker said: "This is unprecedented ...This was on CNBC....There was a battle between a couple of Wall Street muckity-mucks. One of them Carl Ichan and the other Bill Ackman....They talked about their conflicting views of Herbalife....It turned into a donny-brook....It was amazing.... All on CNBC live on Friday afternoon.....This was definitely entertainment."    Read about it and watch video here.

OREGON MUNIS: Brinker says Oregon's newly released GOs have a good credit rating, but the yields are the lowest for munis that he has ever seen. 

SUBSTITUTE SUB-SECTION OF EQUITY INDEX FOR BONDS?....Jim in Illinois wondered what could be used in place of low-paying bonds...."something with regular dividends or water works or partnerships"?  Brinker told him that he could do that, but it should be counted in the equity ratio. 

MARKETIMER FIXED INCOME PORTFOLIO....Brinker replied to Jim: "What we've done in the investment letter.... We have a income portfolio, which is at this time, entirely representing fixed income investments. You are right the yields are not high, but that's the world we live in. Remember we have a slow-growing economy." 

Honey EC: Brinker talked about the Marketimer income portfolio several times today, and he made a special point of saying that it is entirely in fixed income investments again.  That is so because in December, he sold all of the Vanguard Wellesley Income Fund which is about 40% in equities. Now he only has four funds in that portfolio: Double Line Total Return Fund (DLTNX); Dodge and Cox Income Fund (DODIX); Metro West Total Return Bond (MWTRX); Vanguard Ginnie Mae Fund (VFIIX) -- evenly divided. 

FEDERAL RESERVE IS IN ALL TO KEEP RATES LOW....Brinker continued with Jim: "We have a slow-growing economy. We have a Fed that is all in.  I mean, like totally dedicated, for the time being, to keeping rates near historic lows." 

RISKS AND DIFFICULTIES OF GETTING FIXED INCOME YIELD UP... Brinker continued with Jim: "There are ways to get your investment yield up, but always keep in mind when you increase your investment yield, with that goes an element of risk -- you can diversify, but there is always an element of risk. For example, let me give you an area that is very difficult to diversify, which is interest rate risk. If you are holding fixed income securities, and interest rates move against you, that is a negative. That's a very difficult thing to fully diversify if you want to try to generate yield in a quality investment, and you pick a maturity area that you are comfortable with -- and a duration area -- the reality is if the rates go against you in a typical fixed income portfolio, that's going to be difficult. And that's the world we live in today." 

Jeffchristie's Moneytalk Final Exam Question:

Anonymous (whose writing style reminds me of our old friend allen coleman) asked:  

"i do not recall bob ever mentioning the end of the secular bear mkt. when di he announce that? thanks" 

That is a great question for the Moneytalk final exam. Here are the choices:

A) Brinker has yet to declare the end of the secular bear market.
B) Brinker said it was over before he said it wasn't over.
C) Brinker said it was over in the June 2007 edition of Marketimer.
D) Brinker said it isn't over till it's over in the May 2009 edition of Marketimer.
Answer

Brinker's guest today is Pankaj Ghemawat (speaking from Spain): World 3.0: Global Prosperity and How to Achieve It

San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)  

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January 20, 2013, Bob Brinker's Moneytalk: Show Summary, Excerpts and Commentary

January 20, 2013...Bob Brinker returned to Moneytalk after a two week vacation. (comments welcome)

STOCK MARKET....Bob Brinker said: "2012 was really a very good year for investors.....There was a lot of money to be made...The S&P 500 Index in 2012 was up over 15% in total return for the year...."

INCOME INVESTING....Brinker continued: "There was also money to be made in income investing as well....The painful place to be was in short-term investments, money market funds, cash equivalents, places like that....The rate of return in that area was very close to zero."

HISTORIC CYCLICAL BULL MARKET....Brinker comments: The cyclical bull market that we are in that started back March of 2009, now ranks as one of the nine greatest of all time. An amazing run....which has now seen the S&P Index rise more than 100%. That's only the 9th time in history that we've seen a gain in over 100% in a bull market......As we look at it right now with the S&P Index sitting in at 1486, when you compare that to the starting date back on the 9th of March, 2009, when most investors seemed to think the banks were going under and it was over, S&P, at that time,  trading at the 676 level, so it's more than doubled in less than four years time."

Brinker continued: "It closed last in 2012 at 1426, having closed the prior two years, it closed out 2010 and 2011 at the 1257 level. So we had the S&P at the 1257 level at the end of 2010, also again at 2011, no change in the index that year, small dividend add-on, couple of percent. But then in 2012, the total return over 15%, index itself up 13%, plus a couple of percent dividend and finished out around 1426 in 2012.  So for the ninth time on record, we have a bull market in which the S&P 500 has risen more than 100%. That is historic."

Honey EC: Brinker hammered the point that this has been an amazing three-year cyclical bull market and he said that there was "a lot of money to be made" in 2012. But if you have been a Marketimer subscriber and had actually followed Brinker's advice, did you make a lot of money in 2012? Not unless you count re-gaining your losses as "making lots of money." 

Brinker's Marketimer model portfolios have been fully invested for the past ten years.  Therefore, those portfolios were cut in half from the October 2007 high to March 2009 and it took three years of this cyclical bull market (until August 2012) for Brinker's Marketimer model portfolio I and II to return to the same value they were before the bear market began. 

Why didn't Brinker ever mention on the air that he was happy that his followers were finally made whole from his devastating bear market blunder? In my opinion, he doesn't give full disclosure to the audience because it would become clear to the audience that, even though he's a good teacher, market-timing is not his strong suit. 

TARGET MATURITY DATE BOND ETFS....Mike in Denver asked Brinker  about them and said it was a new type of investment tool. Brinker didn't seem to know much about them.  All he said was that being new was "scary," and he would reserve judgment until they have a chance to show how they would react if rates were increasing.

WHAT DOES DURATION MEAN TO INTEREST RATE RISK:  Brinker explained the concept of duration again: "Duration is the amount of time over which the interest payments and the final return of principal are received  That gives you a duration computation and the duration computation gives you an indication of the price change risk that you are taking with an investment. For instance, if you have an investment portfolio of income securities with a duration of 3, what that means is that if the average interest rate on that portfolio goes up 1%, then the  net-asset-value on that portfolio is going to decline about 3%."


FISCAL CLIFF DRAMA.... Brinker said: "We told you on this program in advance that the entire drama over the fiscal cliff was just a drama. And that when all was said and done, with the exception of high-earners, the tax bracket would not change and they did not  change in terms of the personal income tax brackets....The high-earners don't come in to play until they are making over $400,000 a year in taxable income."

MORE FISCAL CLIFF THINGS TO KNOW....At the beginning of the second hour, Brinker continued discussing the Fiscal Cliff. His comments summarized: The estate tax remains at $5 million, adjusted yearly for inflation, so 2013 it's  $5 1/4.....Annual gift tax exclusion is now $14,000 -- twice that for a couple.....Capital gains tax basis of assets acquired from a decedent will be the fair market value of the property at the date of the decedents death....IRA charitable rollover has been re-instated for 2012 and 2013. If you are 70 1/2, you can roll over up to $100,000 from your IRA directly to a qualified charity with no Federal Income tax....A rollover made by the end of this month can be counted retroactively for the 2012 tax year....You have to check for any state ramifications....

IRA TAX CODE CHANGES: Brinker said: "The limit on IRA has increased...In 2013, you are allowed to put away up to $5,500 in your IRA. This applies to traditional IRA and to the Roth.....If you are 50 years or older, you are allowed.....an additional contribution of $1,000....What does IRA stand for? IRA stands for Individual Retirement Arrangement....."

DEBT CEILING MAY BE GONE AWAY FOR NOW....There is a vote scheduled for Wednesday will extend debt ceiling for three months with no demand for any spending cuts included. March 27th is the deadline for new spending cuts or the government will "shut down."

BRINKER SITTING IN VEGAS....John from a California coastal town (he didn't say where) talked about how it might decide it was worth paying the outrageous state income tax to stay in such a beautiful place near the beach,  instead of being out in the desert. Brinker replied: "John, sitting here in Vegas on a day when we are looking at 65 -70 every day this week. Perfect golfing weather. Sitting here in Vegas talking to you about this right now, I'm biased, so don't ask me."

Honey EC: John laughed out loud at Brinker's reply, and so did I --  because Brinker must not realize that we here on the California  coast  have year-round weather like he is experiencing this week -- with a few days off for some much-needed rain to water the TREES that Vegas (and most of Nevada) does not have.  Let's compare weather  in July, Bob and you can tell us about the dry tumbleweed....   :)

KEY TO SAVING MONEY...Brinker's comments: Get started and save as much as you can, but make it a minimum of 10%. Follow the rules and you are on your way to the Land of Critical Mass.

HOW TO GET STARTED INVESTING: Brinker recommends John Bogle's Common Sense on Mutual Funds. It's a great way to go down the learning curve and learn a lot of fundamentals of investing.  Bogle writes about  the benefits of keeping expenses low with no-load mutual funds, the value of diversification and asset allocation. (See the link in the right column on this blog.)

Brinker doesn't usually pre-announce his guest speaker, but in the first hour, he announced that his third-hour guest would be a former FDIC Chair, Sheila Bair --  and said he was "very excited" about it.

Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself

Jeffchristie's Moneytalk Final Exam Question:

Caller John a pilot who lives in California mentioned the Barrett Jackson classic car auction that took place this week in Scottsdale. Bob Brinker said he had no interest in owning the Batmobile. The original Batmobile used in the TV series sold at the auction for:

A) $25,000 

B) $100,000

C) $1,000,000

D) $4,200,000
Answer

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January 18, 2013, Bob Brinker's Stock Market Worries and David Korn's Market Analysis

January 18, 2013....In the December, 2012 issue of Marketimer, Bob Brinker said: "As we have observed, the stock market was unable to generate a health restoring correction this year. In both 2010 and 2011, the market experienced health restoring corrections which paved the way to a continuation of the cyclical bull market trend. The absence of such a correction in 2012 raises questions with regard to the sustainability of the cyclical bull market trend that began in March of 2009. We are  maintaining our elevated level of vigilance with regard to the market trend."

As you can see, Bob Brinker clearly states that a cyclical bull market began in March of 2009. Obviously, he's nervous that it might be getting long-in-the-tooth.  It's important to know that  in March of 2009 when this cyclical bull began, Brinker was totally convinced that the 2008 mega-bear market was going to continue.

March 5,  2009 Marketimer, Brinker said: "This is, by far, the most difficult stock market we have ever seen....Due to the fact that the November 20, 2008 S&P 500 Index closing low failed to hold during the testing process, we believe a new bottoming process will be necessary for a sustainable market advance."

The bear market bottomed one week later, on March 11, 2009! So be cautious about trusting him to call the top any better than he called the bottom, even after having ridden it down fully invested.

David Korn, in his weekly newsletter published on January 14th wrote about the current cyclical bull market. David Korn wrote:

This bull market is now 3 years, 10 months and 6 days long. Is that considered a long bear market by historical standards? The answer is a definitive yes. According to Ned Davis Research, considered by me as the gold-standard shop for quantitative historical research on market history, there have been 33 bull markets from the beginning of 1900 until March 2009. The average length of those bull markets was 2.1 years. Only five of those 33 bull markets lasted over 3-1/2 years, and we are now at 3 years and 10 months. And of those five, three of those bull markets ended in a bad way, to wit: 1929, 1966 and 2000. So no doubt, we are long in the tooth by historical measures.

One side note on this discussion. As an amateur market historian, I pride myself on being precise and open to opposing view points and so I want to at least acknowledge that there are some who argue that the bull market is only 1-1/2 years old because the stock market declined more than 20% in October 2011. However, as I wrote in several special alert e-mails during that time, we didn't meet the technical definition of a bear market at that time which is a 20% decline on a closing basis. But we sure got close. On October 4, 2011, the S&P 500 during intra-day trading got down to 1074.77
which marked a decline of more than 20% from its prior peak; however, on that day the market rallied to close at 1.123.95 and therefore the October 3rd¹s close of 1.099.23 remains the ³correction² closing low ­ just a hair shy of a bear market, but maintained its ability to elude bear market status if you measure it on a closing basis only.

Honey EC: Bob Brinker uses closing numbers only.  He claims that the 2011 correction didn't quite reach 20%, so it wasn't a bear. The reason he does that is because he and his followers were riding it down  and he didn't want to have to admit he missed another bear market call as he had done only 3 years earlier. 

David Korn talks about presidential cycles: 

Putting aside the issue of a second term, how does the stock market do generally in the first of the four years of a presidential cycle? If you look at the Dow Jones Industrial Average going back to 1833, Presidential election years have averaged 5.1%, but the year following the election has only averaged 1.9%. For purposes of trying to handicap what impact the election cycle has on the stock market this year, the probability of an up year during an election year has been 65.1% whereas the probability of an up year during the year following an election falls to 45.4%. Still, what does that tell us? That it is a little less than a 50/50 chance of an up year.

In more recent history, since 1961, the average return of ALL post-election years has been 7.5% going back to 1961. But when you look at how the post-election returns have been in secular bull vs. secular bear markets, the returns are very different. The average post-election return during secular bull markets is 20.3% vs. only a 1.6% return during secular bear markets.

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2013

You can request complimentary issues of David's weekly newsletter and the fabulous Retirement Advisor that he and Kirk Lindstrom publish: LINK

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January 13, 2013, Bob Brinker's Moneytalk, Honey Asks: Is a Stock Market Top in Sight?

January 13, 2013....For the second week in a row, Bob Brinker did not host Moneytalk. Neale Godfrey filled in. We Bob Brinker fans hope that all is well with him and he is enjoying a wonderful, long and well-deserved vacation.

I listened to all three hours of Neale Godfrey and will not be covering anything she said. Her main topic of the day was jobs and how "we" can get this country going again.

Jeffchristie sent the following comments about Neale's show today:

Honey,
Neale made several statements today that didn't make sense to me. She said several times that the United States no longer produces Steel. According to the World Steel Association the United States is the third largest producer of steel in the world.  

List of Countries by Steel Production 

About 40 minutes into the third hour she said that 2010 was right in the middle of the recession. The recession started in December 2007 and ended in June 2009 according to the National Bureau of Economic Research. 

          Business Cycle: National Bureau of Economic Research

It is mistakes like these that make me wonder if Neale is qualified to do this type of show.

Honey here: Looks like Brinker is trying to call the stock market top.

I want to talk about the "elevated level of vigilance" which Brinker claims he is maintaining in the January 2013 issue of Marketimer -- certainly not the first time he has said that.

Friday, the S&P 500 Index closed at 1472.05, so it is very close to Brinker's target range of "upper 1400s to lower 1500s."  What is he likely to do next in light of the fact that for the past TEN YEARS he has NEVER recommended raising cash -- in spite of the fact that he has issued multiple "buy signals?"

He claims the buy signals are for new money, but unless one got an inheritance, retired with a big lump sum, sold a home or won the lottery, most new money would have been already dollar-cost-averaged in to the market according to his regular advice.

In August 2012,  Brinker began saying that the 9.9% stock market pullback in 2012 was not "health-restoring" like the corrections in 2010 and 2011.

In September, October, November and December, he repeatedly stated that in 2010, the S&P 500 Index declined  from its April 23 close of 1217.28 to its July 2 close of 1022.58 for a 16% correction, and at that time, he rated the market "attractive for purchase."

He also points out that in April of 2011, the S&P 500 Index declined from its April 29 close of 1363.61 to its October 3 close of 1099.23 for a 19% correction, and at that time, he again rated the market "attractive for purchase."

On the air, Brinker first said he was "keeping an eye on" the market in October 2012 on a Red Eye radio midnight guest-appearance. I posted some excepts HERE. 

So we know that in the last five years, Brinker has ridden the market down with a 57% mega-bear, a 10% correction and a 20% correction.  Is he likely to pick a top now or in the future? Obviously, he would like listeners and subscribers to think he is trying. We will know in the "fullness of time."

Jeffchristie's Moneytalk Final Exam Question:

Neale Godfrey was the president of:

A) The first blood bank.

B) The first Islamic bank.

C) The first Women's bank.

D) The first sperm bank

Neale Godfrey Wiki

Godfrey's guest-speaker today was Sanjay Bose, a professor who spoke about how climate change and weather patterns can affect investments.

San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)  

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January 6, 2013, Bob Brinker's Moneytalk: Neale Godfrey Fill-in

January 6, 2013...Bob Brinker did not host Moneytalk today. Neale Godfrey filled in.

It was a waste of my time to listen to the first two hours of Neale Godfrey, so I won't cause you to waste your time reading a summary of it.  However, the third hour guest was interesting, even though there will be some who do not agree with him.

Guest-writer, FrankJ's summary and editorial comments: 

Special Guest Peter Diamond, 

Jan 6th 2013 

Peter Diamond is an economist, and Institute Professor at MIT, where he has been on the faculty since 1966. Professor Diamond received the Nobel prize in economics, in 2010 (along with two associates, Dale T. Mortensen and Christopher A Pissarides.) The guest authored a book on saving Social Security with Peter Orszag, former Obama administration official. See below. The host, Neale Godfrey pointed out that the current Fed Chair, Ben Bernanke was once a student of Professor Diamond.

Frankj’s editorial comments are in italics: I have listened to many, many teases and introductions to third hour guests on MoneyTalk, and Neale Godfrey’s build up to Peter Diamond’s appearance has to be one of the most lavish. 

Neale said the (Nobel) prize is “considered the most important prize in the world,” and the guest is “amazingly cool” because he threw out the first pitch at a Boston Redsox game. With regard to the former, the guest acknowledged Neale’s mention of the Nobel prize, but did not mention either of his two co-winners.

We do not know if his pitch was thrown from the pitcher’s mound, nor if it bounced before it reached the catcher. When a politician, celebrity or now, a college professor, throws out the first pitch anywhere, we want only two things: if it is a guy, we want him to throw the ball in a coordinated way, i.e., not like a girl. And we want the ball to reach the catcher without going into the dirt. I hope Prof. Diamond qualified on both counts. 

She opened the interview by saying she wanted to hear his comments on unemployment, Social Security and the government as a whole.

Peter Diamond’s answer to Neale’s somewhat awkward opening was to define the difference between a crisis and a problem. A “problem” is something that can turn into a crisis, and he said, unemployment is a crisis, something that has to be dealt with, now. The guest said that federal government debt is a problem.

Neale jumped in and began to ramble, then seemed to realize she was rambling and clammed up.

Diamond continued with his point about unemployment: young people just starting out are especially affected because their wage growth is held back in their early, critical earning years. Paraphrasing: “in a garden variety recession, this effect can last over a decade – but we are not in a garden variety recession, it is referred to as the Great Recession.” Farther up the age spectrum, the older, long-term unemployed become less valuable to the economy and sometimes end up earning lower wages if they do find jobs.

Diamond then changed the subject to debt, and continued with the “problem vs. crisis” theme. Greece, Italy and Spain are examples of economies in crisis, because people are only willing to lend to them at higher and higher interest rates. He thinks the US is not (yet) in that same fix. We still enjoy low interest rates because the bond market has not concluded that we are incapable of repaying our debts. The downgrade in 2011 was more due to “bad politics” than about the nature of the economy.

He allowed as how our debt trajectory is “unsustainable,” and we need to phase in changes, but cautioned against cutting or raising taxes significantly right away, such sudden changes would hurt the economy. We have a decade or more to address this problem.

Neale said that makes her sleep at night.

The guest then discussed Social Security, saying the professional staff of non-political actuaries have said that the trust fund will run out in 20 years, and there could be a 25% benefit cut from one month to the next. This, he said, would be a crisis. He said that there is time to address this with tax increases and benefit reductions for those who can afford it. She asked whether they are listening to you, meaning those in Washington, DC. Peter Diamond said “hearing and listening are not the same thing.”

Just before the break at 3:30, Neale paraphrased the late Milton Friedman’s notion that Social Security is a mechanism that transfers wealth from the poor to the rich – citing the differences in life expectancies between rich and poor. She wondered aloud “are the poor and middle class bearing the brunt?” Diamond jumped in with the statement that “all that is wrong,” adding that he thought it was important to get the word in, in case people tune out during the commercial break, he didn’t want them tuning out thinking that Friedman, as quoted by Godfrey, was right. Neale Godfrey said, she has been told she was wrong before – but he wasn’t referring to her.

After the break Neale re-iterated Prof. Diamond’s accomplishments. But instead of getting back to him on his thoughts about Social Security – which is probably what he expected, and what everyone listening expected, she took four calls. I won’t summarize these in the interest of space.

As the hour wound down, Neale asked Prof. Diamond for his solution to unemployment.

Diamond said we need to continue aggregate spending and boost growth. He cited education spending, basic research and infrastructure. Spending in these areas as a percent of GDP has shrunk over 30 years. With regard to education, “throwing money at the problem hasn’t worked, but taking money away doesn’t work either.” With the idle labor and equipment available, and the low cost of borrowing now is the time to spend the money on these programs.

(If Paul Krugman, another Nobel prize winner, was listening, he was probably pounding the table in agreement because all through this meltdown and recession, he has been pounding out column after column calling for more spending, more deficit, more debt).

Not part of the interview was the fact that Peter Diamond was nominated to the Board of Governors of the Federal Reserve, 3 different times beginning in 2010. Ultimately, he withdrew himself from consideration in June of 2011. His op-ed piece on his decision to withdraw can be accessed here:

When a Nobel Prize Isn't Enough NYTimes

I quote one paragraph from it because it is in line with something that Bob Brinker has mentioned repeatedly with regard to the need for the independent Federal Reserve.

“But we should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight. We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms.” 

Here is a link to a summary of the Diamond-Orszag for saving Social Security. 

Saving Social Security: The Diamond-Orszag Plan, Brookings Institute

Honey here: Thank you so much FrankJ -- great summary. I would like to add just a few personal comments:

Today, Peter Diamond did a first on Moneytalk. He interrupted Godfrey (who was paraphrasing Milton Friedman) and said, "Let me just jump in and say it's all wrong. But we'll get back to that, just in case some listener turns off and goes elsewhere or somebody in a car...."  At that point, Godfrey interrupted Diamond and tried to make light of it by saying that he wasn't the first person to say that she is wrong, and went to a break. As FrankJ said, Diamond was referring to  her citing Milton Friedman. When the break was over, Godfrey again sang Diamond's praises and immediately went to callers. Diamond never got a chance to defend his assertion. Did they discuss it during the break and decide to drop it? 

I happen to believe that Milton Friedman was an economic genius and would trust his judgment over Diamond's regardless of the awards Diamond sports.

Jeffchristie's Moneytalk Final Exam Question:

Neale Godfrey's stepson is Josh Savaino. He played Paul Pfeiffer Kevin Arnold's best friend on the TV series The Wonder Years. He was the inspiration for which of the following characters on the Simpsons. 

A) Apu
B) Krusty the Clown
C) Millhouse Van Houten
D) Sideshow Bob 

ANSWER

San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)  

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January 5, 2013, Year 2012: A Great Year for Bob Brinker's Marketimer Model Portfolios

January 5, 2013....Year 2012 has been a great year for Bob Brinker's Marketimer subscribers and radio followers because Marketimer model portfolios have now recouped all 2008-2009 bear market losses.

Bob Brinker's official performance record is contained in his three Marketimer model portfolios.  That is where he makes asset allocation changes and mutual fund changes. If he raises cash, it is shown there.

Brinker publishes the  performance of the three portfolios on his website, and Mark Hulbert  (Hulbert's Financial Digest) ranks  Brinker's market-timing performance using an average of the three portfolios.

Therefore, Brinker's success and failure as a market-timer is reflected in those portfolios. No matter how many times he issues so-called "buy-signals," it makes no difference to those who follow his advice in the newsletter and remain fully invested -- never raising cash.

Brinker's Marketimer model portfolio asset allocation has been 100% fully invested since March, 2003. They reached their all-time-high in October, 2007:

That was when the 2008-2009 megabear market began -- the worst since the Great Depression. Brinker advised his subscribers and listeners to remain fully invested and shockingly gave repeated buy-signals as the market fell -- so that any new money was invested on the way down.

Model portfolios I and II, both 100% equity holdings, crashed about 57% from top to the market bottom in March, 2009. Model portfolio III, which at the market high was about 40% bonds, lost slightly less.

Five years later,  in 2012, all three of Brinker's model portfolios have finally regained their horrific losses and are slightly ahead of where they were on October 31, 2007. This has been a good year for the stock market and you can see here where the portfolios ended 2011. They still had a ways to go in 2012 to recover back to 2007 levels:

Yes, you read that right. It took five years to get back to even and move slightly ahead.  Will Brinker raise cash before the next megabear market? I don't think so....He never sells into weakness, and he didn't sell for the last two (infinitesimally less than) 20% correction in 2010 and 2011.

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January 2, 2013 Bob Brinker's Moneytalk: What People are Saying About it

January 2, 2013...Bob Brinker's Moneytalk has been on the air 25 years, but there have been some major changes in the past couple of years.

Firstly, he used to broadcast on both Saturday and Sunday and he took calls for the whole three hours. Now the last hour is devoted to a guest who has a book to sell.

 In June 2010, Moneytalk was dropped to one day per weekend -- Sundays only. 

Then in December 2011, Moneytalk was dropped altogether from San Francisco's power-house radio station, KGO 810. It was picked up by KGO's much less powerful sister-station, KSFO 560. 

In spite of Moneytalk only being broadcast one day a week, Brinker only hosts the program an average of 3 times per month -- sometimes even less. The other Sundays, either Lynn Jimenez or Neale Godfrey do the program. 

Over the past years, mixed in with Brinker's fine teaching skills, was a bit of exciting investing information and some stock  market guidance. However, it seems to me that he mostly just "mails it in" these days. It's really irritating to tune in expecting to hear the old Brinker and all he does is talk politics -- and worse yet, only take calls about politics.  It's impossible to believe that absolutely no one wants to ask questions about the stock market -- especially when it's declining.

Some of you have expressed your viewpoints, perhaps Mr. Brinker might be interested, too: 

Doug said...
Although I'm fully aware of (now tired expression) "the fiscal cliff." However,Brinker lets people spout off about what they think the politicians should or would do.

What has happened to discussions about funds, asset allocations, investment strategies? Brinker's program used to be informative.

December 31, 2012

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Jim said...

Doug is exactly right. Brinker is not very informative anymore. He starts off each program by saying he teaches people "to be their own personal financial manager". But he teaches very little about personal finance lately, and instead just uses the program to rant about the gridlock in Washington and promote his newsletter.

I can see perhaps why he doesn't mention the market, but he could still be informative. He used to talk about things like load vs.no-load funds, term vs. whole life insurance, traditional vs. Roth IRA's and he used to frequently warn listeners of "Shark Attacks".

Perhaps he has become bored with those questions over the years. He probably feels he has answered all those questions already, but there are always newer listeners who could benefit.

In the past when Brinker made an important point, he would say it would be on the "Moneytalk Final Exam". It's been so long since he mentioned those things that I'm starting to forget the answers.

January 1, 2013 3:08 PM
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Anonymous said...

Congratulations....for all those who went in the market at Brinker's recommendation in 2008 at 1450...IF the market holds and you sell ('casue Da Brink ain't about to make a sell call yet) you might just break even today...

Well you will still be out the price of any subscriptions to market holder.

Da Brink - awesome ain't he?......tfb

January 2, 2013 10:48 AM
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Jim said...

I thought I heard a caller ask Brinker on Sunday if he would have any objection to the government raising taxes for those making over $400K/yr. Brinker told the caller he would be fine with that.

Brinker, who falls in that catagory, is always looking to AVOID taxes by investing in Muni-bonds and living in states with no income taxes. I find it surprising he said that. Well Bob, then maybe they SHOULD tax your Munis.

December 24, 2012 9:19 PM

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Honey here: Jim is correct about Brinker looking for ways to avoid taxes. He is always bragging about owning munis -- even California munis (only special government guaranteed, of course) And Brinker spends enough time at his (once-million dollar) Las Vegas, Nevada condo, where there is no state tax.

birdbrain said...

Though much legitimate criticism toward Mr B has been expressed in this blog, his claim of being "pounded and trashed" for conservative fiscal policies exists only in his mind. I doubt that anyone on his show, caller or guest, ever exclaimed "You are wrong, Bob. This country needs to continue deficit spending."

Has a national writer called him out for espousing fiscal restraint?

No. It was simply a sad display of self importance.

Roundly criticized? Examples, anyone?

December 3, 2012 11:08 AM
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Honey here: Birdbrain is right about Brinker whining that he "gets trashed" for his conservative fiscal views. He has done it on at least two programs.  We all know that he's never been pounded on this blog for conservative views of any kind.  LOL! And I know that it has never happened on Moneytalk. So where? Someone in Littleton, Colorado, New Mexico or Lake Las Vegas, please give us a clue? Who is pounding and trashing our Mr. Brinker? :-)

Kirk said...

"It's been several weeks since Brinker talked about "how great the market is doing this year."

Indeed. When was the last time you heard him talk about Intel? I just posted an article about it today: "Intel Bob Brinker's Favorite Trading Stock"

If you remember him taking a call about Intel in the past five years and what he said, please send me an email with what he said.

To me, it seems missing the last TWO bear markets (remember we had a 20% intraday bear last year) has left Brinker deflated and much younger people, like Jim Cramer, with more energy have taken over the airwaves while Brinker's show was cut from 6 hours a weekend to 2 hours plus an hour of interviewing a guest on less popular radio stations.

December 6, 2012 9:59 AM

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Honey here: Not a chance. :)  He hasn't even mentioned owning Microsoft or Vodafone for many years, but they are still on his recommended issues list.  Most of the items on that list (which is off-the-record-books) are not discussed because they are all dogs -- except the big indexes like SPY, VTI or DIA.  Suncor has basically gone nowhere since touted it on Moneytalk.

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